Sept. 12 (Bloomberg) -- Apple Computer Inc. today may begin selling full-length Walt Disney Co. films over the Internet and introduce a new iPod on which to play them.

Chief Executive Officer Steve Jobs will say at a meeting in San Francisco that Apple's iTunes store is adding downloadable Disney movies to its music and television shows, said three officials familiar with the plan. Jobs also may introduce an iPod with a larger screen and more memory to accommodate movies, said analysts including Eugene Munster of Piper Jaffray & Cos.

Jobs is attempting to duplicate with movies the success that made iTunes the most popular online music store and the iPod the top-selling digital player. He faces stronger competition this time, as Time Warner Inc.'s AOL unit and Web retailer Amazon.com Inc. have signed up studios to offer movies online. Microsoft Corp. plans to release a competitor to iPod this year.

``It's going to be a really long horserace, and we're barely a few feet out of the gate,'' said Russ Crupnick, an analyst at NPD Group Inc. in Port Washington, New York. ``I don't think anybody is at a disadvantage today.''

Apple spokesman Tom Neumayr declined to comment, as did David Caouette, a spokesman for Burbank, California-based Disney, the second-largest U.S. media company. Apple last week sent analysts and reporters invitations to today's event showing the company's logo bathed in klieg lights like those seen at movie premieres.

AOL, Amazon

Shares of Cupertino, California-based Apple rose 25 cents to $72.75 in early trading on the Nasdaq Stock Market. The stock has gained less than 1 percent this year.

AOL on Aug. 24 agreed to offer movies online from studios including Sony Corp., News Corp.'s 20th Century Fox and General Electric Co.'s Universal Studios, charging $9.99 to $19.99. Amazon.com, the world's largest online retailer, said last week that it will sell movies for $7.99 to $14.99 for most titles.

Apple has an advantage over AOL and Amazon because of the 50 million to 75 million users who visit the iTunes store each week, said Minneapolis-based Munster, who has a buy rating on the stock and doesn't own any. The iPod is the only media player that works directly with iTunes.

``ITunes clients will basically give them a huge head start in the market,'' said Munster, who estimates Apple will command about 60 percent of the market for movie downloads. AOL and Amazon.com ``just don't have the same exposure and weight as iTunes.''

Rising Revenue

Apple has sold more than 58.9 million players since releasing the iPod in October 2001. Sales of the iPod and of iTunes song and video downloads accounted for 45 percent of Apple's $4.37 billion in revenue in the period ended July 1, up from 38 percent a year ago.

ITunes movies may be a threat to Wal-Mart Stores Inc., the largest seller of DVDs, NPD's Crupnick said. ``There are movies I have to own and collect, versus movies I want to watch,'' he said. ``That second category of video is the one where physical sales are most at risk'' at Wal-Mart.

The Bentonville, Arkansas-based company has pressured Hollywood studios to keep download prices comparable to those for DVDs, he said.

Apple probably will continue the limited-pricing strategy that helped make iTunes successful, and charge $14.99 for newer releases and $9.99 for older movies, one of the people familiar with the plan said. ITunes charges 99 cents for a music download and $1.99 for video.

More Studios

Other studios will probably sign up with Apple, said JP Morgan Securities Inc. analyst William Shope in New York. ``I think Disney is the easiest first source for Apple, primarily because of the companies' relationship,'' he said. ``It would be a mistake to assume it would be a permanent strategy.''

Jobs, 51, is a Disney board member and its largest shareholder following Disney's purchase of his Pixar animation studio this year.

Jobs has introduced new iPod models in each of the past two years to lure first-time buyers and encourage current owners to trade up. Last year, it was the Nano, video iPod and the low-cost Shuffle. In 2004, Apple unveiled the iPod mini.

The new iPods, the first this year, may help forestall efforts by Microsoft, the world's biggest software maker, which is developing a rival portable media player and new service.

Microsoft, based in Redmond, Washington, has resources to become an instant challenger, as it did with the Xbox in video game consoles, said Michael Gartenberg, an analyst with Jupiter Research in New York.

``When an 800-pound gorilla jumps in the water, it makes a splash,'' he said.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

Last Updated: September 12, 2006 08:54 EDT